Can I ask about college funds/529 in this forum?
I don't see a specific forum for college funds so I hope I can ask this question here. We never started college funds for our kids because with a family of 6, there wasn't really a lot of extra money to do so. Now we are more financially able to contribute to funds or save at this point. Is it too late with a first kid heading to college this fall and a high school sophomore and two eighth graders coming down the line? I see our kids taking out the max federal loans, but SOME of the other expenses we will be able to pay. Do we start dumping money into college funds or just save it and pay as much as we can as we go along? Any advice would be appreciated.
Replies to: Can I ask about college funds/529 in this forum?
If you can put it in long enough to make some tax free earnings, I'd put it in the 529. If you are just going to start drawing out whatever you put aside, it doesn't seem worth it to me.
That is why I asked! Setting it aside in just our bank account is not the same thing as starting some kind of fund somewhere else. I wanted to know if there is a tax benefit or something that would guide us to a short term fund at this point.
With a family of 6, you're probably getting hurt by the new tax law. Be sure to take that into consideration before you lock money away in a 529 plan
Yes, it's true. A sibling is not expected to pay for a brother's or sister's college expenses. A 529 account owned by a parent, regardless of who is named as the beneficiary, is controlled by the parent and by changing the beneficiary can be used for any child (or anyone, for that matter).
Control. A 529 account in the name of/owned by the child is money that is legally owned by the child, and the child will legally gain full control of the account upon reaching the age of majority. At that point, the child will be legally entitled to do whatever he/she wants with the money.
If the younger child's account is owned by the child, this would certainly reduce the parent's assets that are required to be reported on FAFSA and Profile. It would also be a gift to the younger child account owner, and taking the money out of the account later to use it for a purpose other than for the benefit of the younger child would be unethical and likely illegal.
I have one child receiving some financial aid. It would benefit me to at least move some of the other kid's 529 plans to my other kids. Especially the amounts that I know they would be using.
So let me get this straight. The account that you want to move money from is owned by you (or the other parent). The account or accounts that you would move the money to are owned by the other kids. In other words those accounts for the other kids are custodial 529 accounts, also known as UTMA/UGMA 529 accounts. Is that all correct?
What you are proposing would shield the assets in the UTMA/UGMA 529 accounts from a FAFSA filed by a sibling. The main drawbacks are, first of all, the control issue once the account owner reaches the age of majority, and second, some (many?) Profile schools will consider a student-owned 529 account to be a student asset (not a parent asset as is the case with FAFSA), with the resulting effect on need-based aid.